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The share market suffered the latest in a recent series of sharp setbacks amid signs Wall Street may break below a key technical support level tonight.
The S&P/ASX 200 dropped 97 points or 1.42 per cent to a seven-week low. The fall extended the market’s decline over the last three weeks to around 5.6 per cent.
Utilities and resource and banking stocks spearheaded today’s loss. An abrupt morning decline in US equity futures and other risk assets gave the retreat added impetus.
What moved the market
The ASX joined a broad retreat from risk as investors wrestled with fears central banks will stifle global growth as they focus on inflation. Besides Australian share prices, other victims of those concerns this session included US equity futures, crude oil and cryptocurrencies.
S&P 500 futures skidded as much as 0.6 per cent before paring their fall to 11 points or 0.27 per cent. Importantly, the drop took out the 3,900 technical support level seen as key to the market’s near-term direction.
“If we hold 3,900, that is a bullish signal,” NewEdge Wealth’s chief investment officer Cameron Dawson told CNBC. “If we don’t, then that 3,600 is in play in short order.”
Brent crude dropped US$1.44 or 1.5 per cent to US$91.40 a barrel. Bitcoin fell to its lowest since late June.
Bond markets continued to flash recession signals. The ten-year US treasury yield climbed 16 basis points to its highest since June. The 30-year yield touched a level last seen in 2014. The Australian ten-year yield was also on the march, reaching June levels.
Investors hoping the Labor Day long weekend in the US would act as a circuit-breaker were disappointed as selling pressure continued overnight. The S&P 500 dropped 0.41 per cent to 3,908. The Nasdaq Composite extended its longest losing run since 2016 with a fall of 0.74 per cent.
Today’s ASX decline continued a recent pattern of sharp down-legs followed by a day or two of consolidation before the pattern repeats. Today’s decline brought the index within 4.5 per cent of the June 20 closing low.
“ASX 200 is exhibiting no sign of returning to the 7,000 level in the near term. It will be shaped by several factors related to the domestic and global economy. These factors are at present pretty confusing, with low unemployment and yet fears of a sharp economic downturn in the near future,” Kunal Sawhney, CEO of research group Kalkine, said.
The market retained most of its losses after ABS data showed the Australian economy expanded in line with expectations last quarter. Gross domestic product increased a seasonally-adjusted 0.9 per cent for the quarter and 3.6 per cent for the year.
Household spending jumped 2.2 per cent as Australians spent up on travel and dining out. The savings to income ratio fell for a third quarter.
Winners’ circle
IGA and Mitre 10 operator Metcash rallied 0.49 per cent after reporting strong sales momentum since the start of its current reporting period. Today’s annual general meeting heard group sales increased 8.9 per cent through the 17 weeks to August 28.
Hardware sales were particularly strong, increasing by 19.5 per cent. Liquor and food grew by 11.5 and 4.3 per cent, respectively.
A positive crop forecast lifted United Malt 1.47 per cent. The North American barley crop was expected to rebound in volume and quality from last year. Rain in Australia across growing regions had also created favourable growing conditions.
Other defensive plays to see gains included ResMed +4.23 per cent, Elders +2.79 per cent and Fisher & Paykel Healthcare +3.02 per cent.
Lake Resources firmed 0.41 per cent following the appointment of David Dickson as CEO and Managing Director. Dickson has 30 years’ experience in the energy and construction sectors.
Doghouse
China demand worries drove Rio Tinto and Fortescue Metals to their lowest since November. With around 60 million Chinese in lockdowns impacting 33 cities, iron ore prices fell 1 per cent this afternoon.
Rio shed 1.53 per cent and Fortescue 2.68 per cent. BHP gave up 2.68 per cent.
Other miners to feel the cold wind included Chalice Mining -13.04 per cent, New Hope -5.42 per cent and Nickel Industries -5.03 per cent.
Energy producers pared two days of gains after Brent crude unwound Monday’s bounce. Woodside dropped 3.16 per cent. Santos lost 1.64 per cent.
Nineteen of the twenty market behemoths of the ASX 20 declined. The four high-street banks shed between 1.37 and 3.08 per cent. Macquarie Group dropped 3.06 per cent, Woolworths 1.25 per cent and Goodman Group 1.22 per cent.
Seven West Media shed 1.02 per cent as brokers reassessed the group’s earnings outlook after securing the media rights to AFL from 2025 until 2031. Goldman Sachs cut its earnings forecast for 2024-25, citing higher broadcasting costs.
Among stocks trading ex-dividend, Brambles lost 1.74 per cent, Healius 1.37 per cent, IDP Education 0.68 per cent, Insignia 7.1 per cent, SEEK 3.4 per cent, Amcor 1.31 per cent, Austal 0.78 per cent, Meridian Energy 3.26 per cent, Viva Energy 7.07 per cent and Medibank 1.93 per cent.
Other markets
Weak Chinese trade data added to pressure on Asian markets. The Asia Dow skidded 2.24 per cent, Hong Kong’s Hang Seng 1.99 per cent, China’s Shanghai Composite 0.2 per cent and Japan’s Nikkei 0.72 per cent.
Gold drifted down US$7.70 or 0.45 per cent to US$1,705.20 an ounce.
The dollar hovered near its lowest level since mid-July. The Aussie eased 0.2 per cent to 67.15 US cents after losing more than 1 per cent overnight.
